Dive Brief:
- Increased pressure to deliver goods quickly has contributed to demand for distribution facilities near airports, prompting rent premiums for those properties, according to a CBRE news release.
- Industrial properties within a five-mile radius of airports command rents that are 18.8% higher than others in the market, per the commercial real estate and investment firm. Airports generating the highest rent premiums are located in Los Angeles, New York, Miami, Chicago and Philadelphia — all densely populated markets that lack developable land.
- “The immediacy of e-commerce deliveries and the generally faster pace of business than in past decades, among other factors, have made airport warehouses a critical link in many supply chains,” said John Morris, CBRE Americas President of Industrial & Logistics, in a statement. “Rents for these properties will continue to exceed their market averages for the foreseeable future.”
Top U.S. airports with the highest industrial rent premiums
| Market | Average rent within five miles of airport | Premium over metro-area rent |
|---|---|---|
| Los Angeles County | $23.02 | 36.8% |
| New York Boroughs | $32.35 | 34.6% |
| Miami-Dade | $13.33 | 24.6% |
| Philadelphia | $10.00 | 23.5% |
| Chicago | $7.73 | 23.5% |
| PA I-78/I-81 Corridor | $7.35 | 18.5% |
| Dallas/Fort Worth | $6.80 | 10.7% |
| East Bay, California | $12.74 | 6.7% |
| Louisville | $5.15 | 4.5% |
| Cincinnati | $5.05 | 4.3% |
Source: CBRE
Dive Insight:
As shipping costs and supply chain disruptions have climbed during the pandemic, some companies have invested in placing manufacturing operations closer to end consumers. CBRE cited this in its report on airport-adjacent rents as "another catalyst for demand in airport markets.”
Despite the added expense, renting a facility close to an airport can be a cost-effective measure for companies that lean on air cargo shipping. Transportation can make up 45% to 70% of supply chain costs, while occupancy costs range from 3% to 6%, according to CBRE Supply Chain Advisory. High-value items such as electric machinery and pharmaceutical products are often imported through gateway airports.
For businesses considering properties near airports, rent growth is expected to accelerate in the markets with the highest premiums "due to highly constrained supply and elevated transportation costs," CBRE noted. This will most directly affect 3PLs, as they account for the most leasing near airports, at 42.7%, as of August. General retail and wholesale companies ranked second at 32.2%.
Industrial tenants have already been feeling the heat of elevated rents and low vacancy rates, as warehousing demand jumped during the COVID-19 pandemic. Overall industrial supply in Q3 outpaced demand for the first time in eight quarters amid an uncertain economic climate, according to an emailed news release from Cushman & Wakefield. But rents still grew 22% YoY while vacancy fell 60 basis points YoY.
